Brazil's President Dilma Rousseff speaks during the opening ceremony of the 3rd National Conference of Solidarity Economy in Brasilia November 27, 2014.UESLEI MARCELINO/Reuters
Brazilian president Dilma Rousseff announced the country's new economic team Thursday, picking a pro-market slate that signalled she intends to make a significant shift from the state-led policies of her first term in office.
She named Joaquim Levy, a banker and former treasury secretary, as her finance minister. Nelson Barbosa , an economist, will be planning and budget minister. Alexandre Tombini, the current president of the Central Bank, will stay in his job.
Mr. Levy, who holds a doctorate from the University of Chicago, is known by the nickname Joaquim Scissorhands in the capital, due to his aversion for government spending.
Speaking to the press in Brasilia at the announcement, the new team made clear that their focus will be on reducing spending and restoring Brazil´s credibility in the international markets, as they respond to a dramatic slowdown in the economy. It was a clear sign that Ms. Rousseff, who is widely perceived as having run the economic file herself during her first term, recognizes the need for a dramatic change, after she won re-election by only one per cent of votes last month, in a race dominated by discussion of the economy.
Mr. Levy got right to business, announcing that the new surplus target, for 2015, will be 1.2 per cent, and at least two per cent for 2016 and 2017, compared to the 0.2 per cent target Ms. Rousseff is still pushing for this year.
The new team also said it would pursue an inflation target of 4.5 per cent (the previous policy has been to be within two points of 6.5 per cent, but the rate has been at or above that target for months, causing widespread anxiety here.)
He said boosting savings rates, both national and private, would be another priority. "The savings rate in Brazil is very low; increasing this rate has to be one of our priorities. The government will be the example, increasing its savings, which is the primary surplus, and will contribute for other market agents and families to do the same."
The team vowed a more transparent administration and more realistic targets, something for which the current finance minister, Guido Mantega, has been heavily criticized. For the past few weeks, Ms. Rousseff has been fighting Congress to reduce the primary surplus target, since the government will not be able to achieve it.
Brazil´s bourse Bovespa tanked the morning after Ms. Rousseff was re-elected but has been recovering steadily in recent weeks as names of possible candidates for finance minister – all of them conservative – began to circulate. When Mr. Levy began to seem like the lead contender late last week, Bovespa rose five per cent, the biggest climb in the past three years.
Ms. Rousseff´s opposition called her choices hypocritical. "Inviting Joaquim Levy to run the Finance Ministry in a [Workers Party] government is like asking a high-ranking official from the CIA to run the KGB," said Aecio Neves, who lost narrowly to Ms. Rousseff.
But while the business community celebrates, social movements and traditional Rousseff allies are not making any efforts to hide their disappointment with the appointments – especially after an electoral campaign that was focused on the debate about the state´s role in managing the economy and social spending. Sixty left-leaning intellectuals who had backed Ms. Rousseff signed an open letter criticizing her choices, calling them a betrayal of "the agenda that was victorious at the ballot box."
Mr. Levy worked in the governments of both Ms. Rousseff´s leftist predecessor Luiz Inácio Lula da Silva, and of Fernando Henrique Cardoso's, a more conservative president. He is seen as every bit as stubborn as his boss, an indication that she will no longer be trying to act as de facto finance minister, as she did with Mr. Mantega.
Mr. Barbosa, the new planning and budget minister, served as Brazil's deputy Finance minister between 2011 and 2013, and left office after clashing with Ms. Rousseff over spending rates. But he is seen to favour state intervention at a level closer to the president´s than Mr. Levy´s.
But both new appointments were received with enthusiasm in the world of Brazilian business. Roberto Setubal, the president of Itaú-Unibanco, Brazil's biggest private bank, said Mr. Levy and Mr. Barbosa "are great names for the new economic team" and that they promised "good prospects for the country", according to Valor Economico.
Many in Brasilia were also expecting the president to announce the new agriculture minister, to oversee the critical sector that produces 20 per cent of GDP. She is widely rumoured to be planning to put Katia Abreu, the president of the National Confederation of Agriculture, in the post. Ms. Abreu is a senator for a key political ally for the Workers´ Party – and also the voice of big agribusiness and the nemesis of the environmental movement.